A Drop in the Bucket

By Vin Suprynowicz

Special to The Libertarian Enterprise

Retail gasoline prices are up -- in some cases 25 cents since
mid-winter.
With national elections only six months away, this has naturally
brought the politicians running to "ease our pain."
As cynical as such posturing may be, it does at least accurately
demonstrate a difference in approaches between the two branches of
the incumbent party.
Sen. Bob Dole, R-Kansas, has called for the repeal of President
Clinton's 1993 increase -- 4.3 cents per gallon -- in the federal
gasoline tax. At least that identifies the right villain.
President Clinton, on the other hand, opts not to reduce
intervention by the central government, but instead argues he can
solve the problem with yet another one -- selling off some 12 million
barrels of oil this summer from the nation's 585-million-barrel
emergency petroleum reserve.
(The president thus makes a virtue of necessity -- Congress
ordered him last week to sell $227 million worth of the petroleum
stocks to pay for Democratic plans to further meddle from Washington
in the operation of local schools.)
"I have a feeling it (the price rise) has a lot more to do with
profits than it does with taxes," intoned Senate Minority Leader Tom
Daschle on April 29, invoking the standard bogeyman of America's
longest-running left-wing soap-opera: the Robber Baron.
But statistics show drivers in California now pay 49 cents per
gallon in combined federal, state and local taxes. Plenty of other
states top that, including New York and Nevada.
The Silver State has more than doubled its state levy, from 10.5
cents per gallon to 23 cents per gallon, just since 1981. Add
authority for the individual counties to charge an extra 10 cents,
along with the current federal gasoline tax of 18.3 cents, and we're
up to 51 cents of a Nevada driver's $1.43 going straight to the
politicians. Does anyone really believe the gasoline moguls make a 51
cent profit on a gallon of gas? A 5-cent profit? Of course not.
In a competitive marketplace, should any refiner or retailer
artificially escalate prices to reap a profit of more than a penny or
two, competitors always step in to undercut that price.
When prices escalate across the board, it's usually wiser to look
for reasons that affect all suppliers equally -- like the fact that
all California refiners are now under state orders to make a
cleaner-burning gasoline available by June 1, even though everyone
knew that alone would drive up the price by 5 to 8 cents.
California refineries supply many other Western states.
Legislatures like Nevada's have done their best to further stymie
honest competition. In the Silver State, it's illegal for any one
refiner to own more than 15 gas stations. Then, the federal
government recently put many of the more marginal competing stations
out of business with unfunded mandates like the new double-walled
storage tank requirement, as well as expensive "environmental
cleanup" of soils bearing even the most minute traces of gasoline.
The other major reasons for the current price spike appear to be
the conversion of more raw petroleum into home heating oil during the
unusually severe winter just past, combined with news of Mr.
Clinton's own making: Refiners have been reluctant to maintain large
stockpiles at current high prices in anticipation of the United
Nations "allowing" Iraqi oil to come onto the world market.
In fact, 12 million barrels over the course of the summer is
laughable. Just for purposes of comparison, Iraq in 1990 held an
estimated 100 billion barrels in reserve. Americans alone consume
16 to 18 million barrels per day. And at what price will this pitiful drop in the bucket be sold?
Which campaign contributor will pick up that "windfall"?
As Lew Rockwell of the Ludwig von Mises Institute points out,
"This administration complains about foreigners dumping their goods
on American markets below cost. However, when it's our own government
doing the dumping, it's not a vicious practice, but a responsible
economic policy.
"The market specializes in allocating supplies over time via the
price system," Rockwell continues in an April 30 news release from
the free-market Alabama think tank. "When supply is low and demand is
high, prices rise to induce new drilling and distribution. In light
of higher gasoline prices, consumers are already changing some summer
travel plans, another market response.
"The market's price system works so well it doesn't need
management at all. We don't have a strategic shoe or chicken reserve,
yet, somehow, we walk and eat."
Not only that, economist Rockwell turns out to possess that worst
enemy of the liberal, a moderately long memory. Wasn't it just two
years ago, he recalls, that Democrats "agitated for higher gasoline
prices as a way of inducing consumers to purchase less, drive less,
and 'pollute' less?"
If the politicians really "feel our pain," why not simply cut all
their gasoline taxes in half, reducing the price of a gallon, in
these parts, from $1.43 to $1.18, overnight? Does anyone really
believe we weren't paying for "enough government" back in 1981?

Vin Suprynowicz is the assistant editorial page editor of the Las
Vegas Review-Journal. Readers may contact him via e-mail at
vin@lvrj.com. The web site for the Suprynowicz column is at
http://www.nguworld.com/vindex/.

Pallas, the new sci-fi adventure novel by L. Neil Smith is out in
paperback from Tor. Is there room for a socialist utopia on an
individualist asteroid?
Now available at good bookstores everywhere!

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Enterprise, Number 8, May, 1996.